Cascades Announces Record Sales and Adjusted OIBD for the Second Quarter of 2019; Quarterly Dividend Increased from $0.04 to $0.08 Per Share

KINGSEY FALLS, QC, Aug. 9, 2019 /CNW Telbec/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended June 30, 2019.

Q2 2019 Highlights

• Sales of $1,275 million
  (compared to $1,230 million in Q1 2019 (+4%) and $1,180 million in Q2 2018 (+8%))
• As reported (including specific items)
• Operating income of $82 million
  (compared to $72 million in Q1 2019 (+14%) and $73 million in Q2 2018 (+12%))
• Operating income before depreciation and amortization (OIBD)¹ of $154 million
  (compared to $139 million in Q1 2019 (+11%) and $131 million in Q2 2018 (+18%))
• Net earnings per share of $0.33
  (compared to $0.26 in Q1 2019 and $0.28 in Q2 2018)
• Adjusted (excluding specific items)¹
• Operating income of $84 million
  (compared to $68 million in Q1 2019 (+24%) and $76 million in Q2 2018 (+11%))
• OIBD of $156 million
  (compared to $135 million in Q1 2019 (+16%) and $134 million in Q2 2018 (+16%))
• Net earnings per share of $0.28
  (compared to $0.14 in Q1 2019 and $0.30 in Q2 2018)
• Net debt¹ of $1,861 million as at June 30, 2019 (compared to $1,878 million as at March 31, 2019) and net debt to adjusted OIBD ratio¹ at 3.3x on a pro-forma basis².

               

1	For further details, please refer to the "Supplemental Information on non-IFRS Measures" section.
2	Pro-forma basis to include 2018 business combinations on a LTM basis and IFRS 16 Leases impact on an annualized basis as at June 30, 2019.

Mr. Mario Plourde, President and Chief Executive Officer, commented: "Cascades delivered record quarterly sales and adjusted OIBD that were in line with expectations in the second quarter. All our segments executed well. Tissue results were supported by favourable input costs and selling prices and better operational performance, notably at the St. Helens mill in Oregon, Containerboard Packaging performance reflected lower OCC prices and good operational flexibility within a context of softer demand and pricing pressure, while European Boxboard and Specialty Products results benefited from recent business acquisitions.

On the strategic front, we announced the acquisition of substantially all of the Orchids Paper Products assets in early July. This move provides compelling optimization opportunities for our Tissue platform while reinforcing the operational foundation of this segment's U.S. consumer product business. Furthermore, the addition of these assets accelerates our ongoing Tissue modernization plan, is aligned with our efforts to enhance the quality of the products we manufacture, and reinforces our initiatives to support the growth of our customers and the segment. On the Containerboard side, analysis of the Bear Island conversion project in Virginia is advancing, with added time being taken to determine the optimal structure to successfully execute the project and to minimize risk. We expect to provide additional information by the end of the year.

Finally, we are pleased to announce that we are increasing our quarterly dividend from $0.04 to $0.08 per share. This step reflects our strong asset base and financial fundamentals. We continue to prioritize capital investments and debt reduction in our capital allocation, and believe that this dividend increase, amounting to approximately $15 million annually, will not impact our financial flexibility to continue to focus on these priorities for creation of shareholder value. At the same time, we will provide our shareholders with a higher cash return on their investment that is better aligned with the industry."

Financial Summary

Selected consolidated information
(in millions of Canadian dollars, except amounts per share) (unaudited)	Q2 2019			Q1 2019			Q2 2018
Sales		1,275			1,230			1,180
As reported
Operating income before depreciation and amortization (OIBD)^1		154			139			131
Operating income		82			72			73
Net earnings		31			24			27
per share	$	0.33		$	0.26		$	0.28
Adjusted^1
Operating income before depreciation and amortization (OIBD)		156			135			134
Operating income		84			68			76
Net earnings		26			13			29
per share	$	0.28		$	0.14		$	0.30
Margin (OIBD)		12.2	%		11.0	%		11.4	%
1 - Refer to the "Supplemental Information on Non-IFRS Measures" section.

Segmented OIBD as reported
(in millions of Canadian dollars) (unaudited)	Q2 2019	Q1 2019	Q2 2018
Packaging Products
Containerboard	114	111	102
Boxboard Europe	30	29	30
Specialty Products	13	11	9
Tissue Papers	17	4	7
Corporate Activities	(20)	(16)	(17)
OIBD as reported	154	139	131

Segmented adjusted OIBD^1
(in millions of Canadian dollars) (unaudited)	Q2 2019	Q1 2019	Q2 2018
Packaging Products
Containerboard	113	104	105
Boxboard Europe	30	29	30
Specialty Products	13	12	9
Tissue Papers	18	9	7
Corporate Activities	(18)	(19)	(17)
Adjusted OIBD	156	135	134
1 - Refer to the "Supplemental Information on Non-IFRS Measures" section.

Analysis of results for the three-month period ended June 30, 2019 (compared to the same period last year)

Sales of $1,275 million increased by $95 million, or 8%, compared to the same period last year, attaining a record level for the second quarter. Specifically, Tissue sales increased by $34 million or 10%, reflecting a higher average selling price, a more favourable sales mix and exchange rate, partially offset by slightly lower volume following the previously announced closure of 2 paper machines in Ontario. European Boxboard sales increased by $38 million, or 16%, compared to the prior year. This was largely driven by the business acquisition in Spain at the end of 2018, which served to more than offset less favourable selling price and mix and Canadian dollar - euro exchange rate. The Specialty Products segment generated an 18% or $29 million sales improvement year-over-year, reflecting 2018 acquisitions and improved pricing, sales mix and volumes on the packaging side. Combined, these benefits more than offset lower results from the Recovery & Recycling sub-segment due to price erosion of recycled material. Finally, sales in the Containerboard Packaging group decreased by $13 million or 3% year-over-year. This was entirely driven by lower volume, which more than mitigated the benefits of a more favourable exchange rate and sales mix, while average selling prices were stable year-over-year.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $154 million in the second quarter of 2019. This compares to the $131 million generated in the same period last year. This reflects higher average selling prices, a more favourable sales mix and lower raw material prices in the Tissue and Containerboard segments. In the case of both segments, these benefits were partially offset by lower volumes during the period. Tissue results also benefited from ongoing efforts to realign the financial performance by reducing costs and improving execution. This segment also recorded $4 million of prior year U.S. tax credits during the second quarter.  Business acquisitions completed in the last twelve months contributed to the year-over-year improvements generated by Specialty Products and European Boxboard. Results in the Specialty Products segment also benefited from volume and selling price improvements in packaging sub-segments compared to the prior year, the benefits of which offset lower Recovery results attributable to raw material pricing erosion. 2019 operating results also include the beneficial impact of IFRS 16 accounting for leases, which increased second quarter 2019 OIBD by approximately $7 million.

On an adjusted basis¹, second quarter 2019 OIBD stood at $156 million, versus $134 million in the prior year.

The main specific items, before income taxes, that impacted our second quarter 2019 OIBD and/or net earnings were:

• $4 million charge in Corporate Activities related to an environmental provision (OIBD and net earnings)
• $5 million gain in Corporate Activities related to an insurance settlement from a prior year event (OIBD and net earnings)
• $4 million charge in Corporate Activities associated with transaction fees paid for the Orchids' assets acquisition (OIBD and net earnings)
• $6 million unrealized gain on the fair value revaluation of an option granted in the Bear Island project (net earnings)

For the 3-month period ended June 30, 2019, the Corporation posted net earnings of $31 million, or $0.33 per share, compared to net earnings of $27 million, or $0.28 per share, in the same period of 2018. On an adjusted basis¹, the Corporation generated net earnings of $26 million in the second quarter of 2019, or $0.28 per share, compared to net earnings of $29 million, or $0.30 per share, in the same period of 2018.

1 For further details, please refer to the "Supplemental Information on non-IFRS Measures" section.

Near-Term and Strategic Outlook

Discussing the outlook for Cascades, Mr. Plourde commented: "Near-term results in the Containerboard business segment are expected to improve both sequentially and year-over-year, following usual seasonal trends and current market dynamics, while Tissue performance is expected to continue its positive trend in the third quarter. European Boxboard performance is expected to benefit from its recent acquisition on a year-over-year basis, while sequential performance is expected to moderate as a result of lower seasonal demand following holiday-related closures in the third quarter, and lower pricing. We anticipate stable near-term results in the Specialty Products segment both year-over-year and sequentially, as the impact of ongoing lower recycled fibre pricing on the recovery operations is expected to be offset by stable pricing and volumes in packaging. On a consolidated basis, third quarter performance is expected to improve year-over-year and be moderately higher on a sequential basis."

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.08 per share to be paid on September 6, 2019 to shareholders of record at the close of business on August 21, 2019. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). During the second quarter of 2019, Cascades did not purchase any shares.

2019 Second Quarter Results Conference Call Details

Management will discuss the 2019 second quarter financial results during a conference call today at 9:00 a.m. EDT. The call can be accessed by dialing 1-888-231-8191 (international dial-in 1-647-427-7450). The conference call, including the investor presentation, will be broadcast live on the Cascades website (www.cascades.com under the "Investors" section). A replay of the call will be available on the Cascades website and may also be accessed by phone until September 9, 2019 by dialing 1-855-859-2056, access code 8885738.

Founded in 1964, Cascades offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs 11,000 women and men across a network of over 90 facilities in North America and Europe. Driven by its participative management, half a century of experience in recycling, and continuous research and development efforts, Cascades continues to provide innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet. Cascades' shares trade on the Toronto Stock Exchange under the ticker symbol CAS. Certain statements in this release, including statements regarding future results and performance, are forward-looking statements (as such term is defined under the Private Securities Litigation Reform Act of 1995) based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreases in demand for the Corporation's products, increases in raw material costs, fluctuations in selling prices and adverse changes in general market and industry conditions and other factors listed in the Corporation's Securities and Exchange Commission filings.

CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars) (unaudited)	June 30, 2019	December 31, 2018
Assets
Current assets
Cash and cash equivalents	98	123
Accounts receivable	690	635
Current income tax assets	29	29
Inventories	605	606
Current portion of financial assets	8	10
Assets held for sale	3	—
	1,433	1,403
Long-term assets
Investments in associates and joint ventures	81	81
Property, plant and equipment	2,532	2,505
Intangible assets with finite useful life	189	204
Financial assets	18	20
Other assets	53	42
Deferred income tax assets	144	134
Goodwill and other intangible assets with indefinite useful life	545	556
	4,995	4,945
Liabilities and Equity
Current liabilities
Bank loans and advances	16	16
Trade and other payables	768	781
Current income tax liabilities	32	23
Current portion of long-term debt	77	55
Current portion of provisions for contingencies and charges	8	6
Current portion of financial liabilities and other liabilities	104	101
	1,005	982
Long-term liabilities
Long-term debt	1,866	1,821
Provisions for contingencies and charges	44	42
Financial liabilities	7	14
Other liabilities	190	202
Deferred income tax liabilities	194	200
	3,306	3,261
Equity
Capital stock	487	490
Contributed surplus	16	16
Retained earnings	1,022	997
Accumulated other comprehensive income (loss)	(14)	2
Equity attributable to Shareholders	1,511	1,505
Non-controlling interests	178	179
Total equity	1,689	1,684
	4,995	4,945

CONSOLIDATED STATEMENTS OF EARNINGS
	For the 3-month periods ended June 30,				For the 6-month periods ended June 30,
(in millions of Canadian dollars, except per share amounts and number of shares) (unaudited)	2019		2018		2019			2018
Sales		1,275		1,180		2,505		2,278
Cost of sales and expenses
Cost of sales (including depreciation and amortization of $72 million for 3-month period (2018 — $58 million) and $139 million for 6-month period (2018 — $113 million))		1,081		1,003		2,139		1,949
Selling and administrative expenses		111		102		215		205
Loss (gain) on acquisitions, disposals and others		3		—		(7)		(66)
Impairment charges and restructuring costs		1		—		10		—
Foreign exchange gain		(1)		—		(1)		(1)
Loss (gain) on derivative financial instruments		(2)		2		(5)		6
		1,193		1,107		2,351		2,093
Operating income		82		73		154		185
Financing expense		25		19		50		39
Interest expense on employee future benefits and other liabilities		10		4		24		7
Foreign exchange gain on long-term debt and financial instruments		(1)		—		(7)		(1)
Fair value revaluation gain on investments		—		—		—		(5)
Share of results of associates and joint ventures		(2)		(3)		(4)		(4)
Earnings before income taxes		50		53		91		149
Provision for income taxes		10		16		18		40
Net earnings including non-controlling interests for the period		40		37		73		109
Net earnings attributable to non-controlling interests		9		10		18		21
Net earnings attributable to Shareholders for the period		31		27		55		88
Net earnings per share
Basic	$	0.33	$	0.28	$	0.59	$	0.93
Diluted	$	0.32	$	0.27	$	0.58	$	0.90
Weighted average basic number of shares outstanding		93,636,771		94,638,464		93,900,400		94,824,718
Weighted average number of shares		95,058,479		97,011,800		95,395,585		97,404,264

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	For the 3-month periods ended June 30,		For the 6-month periods ended June 30,
(in millions of Canadian dollars) (unaudited)	2019	2018	2019	2018
Net earnings including non-controlling interests for the period	40	37	73	109
Other comprehensive income (loss)
Items that may be reclassified subsequently to earnings
Translation adjustments
Change in foreign currency translation of foreign subsidiaries	(21)	10	(58)	50
Change in foreign currency translation related to net investment hedging activities	14	(7)	35	(30)
Cash flow hedges
Change in fair value of foreign exchange forward contracts	—	—	1	(1)
Change in fair value of interest rate swaps	(1)	1	(1)	1
Change in fair value of commodity derivative financial instruments	(1)	2	(2)	3
Recovery of income taxes	—	—	—	3
	(9)	6	(25)	26
Items that are not released to earnings
Actuarial gain (loss) on employee future benefits	(10)	4	(15)	5
Recovery (provision) of income taxes	1	(1)	3	(1)
	(9)	3	(12)	4
Other comprehensive income (loss)	(18)	9	(37)	30
Comprehensive income including non-controlling interests for the period	22	46	36	139
Comprehensive income attributable to non-controlling interests for the period	7	7	9	25
Comprehensive income attributable to Shareholders for the period	15	39	27	114

CONSOLIDATED STATEMENTS OF EQUITY
	For the 6-month period ended June 30, 2019
(in millions of Canadian dollars) (unaudited)	CAPITAL STOCK	CONTRIBUTED SURPLUS	RETAINED EARNINGS	ACCUMULATED OTHER COMPREHENSIVE LOSS	TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS	NON-CONTROLLING INTERESTS	TOTAL EQUITY
Balance - End of previous period, as reported	490	16	1,000	2	1,508	180	1,688
Business combination	—	—	(3)	—	(3)	(1)	(4)
Adjusted balance - End of previous period	490	16	997	2	1,505	179	1,684
New IFRS adoption	—	—	(9)	—	(9)	—	(9)
Adjusted balance - Beginning of period	490	16	988	2	1,496	179	1,675
Comprehensive income
Net earnings	—	—	55	—	55	18	73
Other comprehensive loss	—	—	(12)	(16)	(28)	(9)	(37)
	—	—	43	(16)	27	9	36
Dividends	—	—	(7)	—	(7)	—	(7)
Redemption of shares	(3)	—	(2)	—	(5)	—	(5)
Dividends paid to non-controlling interests	—	—	—	—	—	(10)	(10)
Balance - End of period	487	16	1,022	(14)	1,511	178	1,689
	For the 6-month period ended June 30, 2018
(in millions of Canadian dollars) (unaudited)	CAPITAL STOCK	CONTRIBUTED SURPLUS	RETAINED EARNINGS	ACCUMULATED OTHER COMPREHENSIVE LOSS	TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS	NON-CONTROLLING INTERESTS	TOTAL EQUITY
Balance - Beginning of period	492	16	982	(35)	1,455	146	1,601
New IFRS adoption	—	—	(2)	2	—	—	—
Adjusted Balance - Beginning of period	492	16	980	(33)	1,455	146	1,601
Comprehensive income
Net earnings	—	—	88	—	88	21	109
Other comprehensive income	—	—	4	22	26	4	30
	—	—	92	22	114	25	139
Dividends	—	—	(8)	—	(8)	—	(8)
Issuance of shares upon exercise of stock options	5	(1)	—	—	4	—	4
Redemption of shares	(5)	—	(7)	—	(12)	—	(12)
Capital contribution from a non-controlling interest	—	—	—	—	—	1	1
Dividends paid to non-controlling interests	—	—	—	—	—	(10)	(10)
Balance - End of period	492	15	1,057	(11)	1,553	162	1,715

CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the 3-month periods ended June 30,		For the 6-month periods ended June 30,
(in millions of Canadian dollars) (unaudited)	2019	2018	2019	2018
Operating activities
Net earnings attributable to Shareholders for the period	31	27	55	88
Adjustments for:
Financing expense and interest expense on employee future benefits and other liabilities	35	23	74	46
Depreciation and amortization	72	58	139	113
Loss (gain) on acquisitions, disposals and others	3	—	(6)	(66)
Impairment charges and restructuring costs	—	—	5	—
Unrealized loss (gain) on derivative financial instruments	(2)	3	(5)	7
Foreign exchange gain on long-term debt and financial instruments	(1)	—	(7)	(1)
Provision for income taxes	10	16	18	40
Fair value revaluation gain on investments	—	—	—	(5)
Share of results of associates and joint ventures	(2)	(3)	(4)	(4)
Net earnings attributable to non-controlling interests	9	10	18	21
Net financing expense paid	(16)	(18)	(59)	(55)
Net income taxes received (paid)	(2)	(1)	(2)	2
Dividends received	2	1	2	1
Employee future benefits and others	(15)	(5)	(22)	(7)
	124	111	206	180
Changes in non-cash working capital components	(36)	5	(66)	(26)
	88	116	140	154
Investing activities
Investments in associates and joint ventures	1	—	1	(2)
Payments for property, plant and equipment	(53)	(67)	(119)	(150)
Proceeds from disposals of property, plant and equipment	1	1	2	82
Change in intangible and other assets	(1)	(3)	(2)	(7)
Net cash acquired (paid) in business combinations	(14)	—	(14)	3
	(66)	(69)	(132)	(74)
Financing activities
Bank loans and advances	(2)	(2)	—	(15)
Change in credit facilities	1	(26)	65	10
Increase in other long-term debt	7	3	7	11
Payments of other long-term debt	(38)	(46)	(79)	(55)
Settlement of derivative financial instruments	—	—	—	(1)
Issuance of common shares upon exercise of stock options	—	2	—	4
Redemption of common shares	—	(6)	(5)	(12)
Dividends paid to non-controlling interests	(6)	(8)	(10)	(10)
Capital contribution from non-controlling interests	—	—	—	1
Dividends paid to the Corporation's Shareholders	(3)	(4)	(7)	(8)
	(41)	(87)	(29)	(75)
Change in cash and cash equivalents during the period	(19)	(40)	(21)	5
Currency translation on cash and cash equivalents	—	—	(4)	3
Cash and cash equivalents - Beginning of the period	117	137	123	89
Cash and cash equivalents - End of the period	98	97	98	97

SEGMENTED INFORMATION

The Corporation analyzes the performance of its operating segments based on their operating income before depreciation and amortization, which is not a measure of performance under International Financial Reporting Standards (IFRS); however, the chief operating decision-maker (CODM) uses this performance measure to assess the operating performance of each reportable segment. Earnings for each segment are prepared on the same basis as those of the Corporation. Intersegment operations are recorded on the same basis as sales to third parties, which are at fair market value. The accounting policies of the reportable segments are the same as the Corporation's accounting policies described in its most recent audited consolidated financial statements for the year ended December 31, 2018.

The Corporation's operating segments are reported in a manner consistent with the internal reporting provided to the CODM. The Chief Executive Officer has authority for resource allocation and management of the Corporation's performance, and is therefore the CODM.

The Corporation's operations are managed in four segments: Containerboard, Boxboard Europe and Specialty Products (which constitutes the Corporation's Packaging Products), and Tissue Papers.

	SALES
	For the 3-month periods ended June 30,		For the 6-month periods ended June 30,
(in millions of Canadian dollars) (unaudited)	2019	2018	2019	2018
Packaging Products
Containerboard	462	475	903	896
Boxboard Europe	270	232	549	478
Specialty Products	193	164	389	323
Intersegment sales	(15)	(23)	(37)	(47)
	910	848	1,804	1,650
Tissue Papers	377	343	725	648
Intersegment sales and Corporate Activities	(12)	(11)	(24)	(20)
	1,275	1,180	2,505	2,278
	OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
	For the 3-month periods ended June 30,		For the 6-month periods ended June 30,
(in millions of Canadian dollars) (unaudited)	2019	2018	2019	2018
Packaging Products
Containerboard	114	102	225	243
Boxboard Europe	30	30	59	58
Specialty Products	13	9	24	16
	157	141	308	317
Tissue Papers	17	7	21	20
Corporate Activities	(20)	(17)	(36)	(39)
Operating income before depreciation and amortization	154	131	293	298
Depreciation and amortization	(72)	(58)	(139)	(113)
Financing expense and interest expense on employee future benefits and other liabilities	(35)	(23)	(74)	(46)
Foreign exchange gain on long-term debt and financial instruments	1	—	7	1
Fair value revaluation gain on investments	—	—	—	5
Share of results of associates and joint ventures	2	3	4	4
Earnings before income taxes	50	53	91	149
	PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT
	For the 3-month periods ended June 30,		For the 6-month periods ended June 30,
(in millions of Canadian dollars) (unaudited)	2019	2018	2019	2018
Packaging Products
Containerboard	14	81	36	140
Boxboard Europe	17	5	28	8
Specialty Products	8	11	14	17
	39	97	78	165
Tissue Papers	18	19	47	28
Corporate Activities	6	6	14	9
Total acquisitions	63	122	139	202
Proceeds from disposals of property, plant and equipment	(1)	(1)	(2)	(82)
Lease acquisitions	(18)	(63)	(33)	(66)
	44	58	104	54
Acquisitions for property, plant and equipment included in "Trade and other payables"
Beginning of period	32	22	37	28
End of period	(24)	(14)	(24)	(14)
Payments for property, plant and equipment net of proceeds from disposals	52	66	117	68

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES

SPECIFIC ITEMS

The Corporation incurs some specific items that adversely or positively affect its operating results. We believe it is useful for readers to be aware of these items, as they provide additional information to measure performance, compare the Corporation's results between periods, and assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation's underlying business operations in measuring and comparing its performance and analyzing future trends. Our definition of specific items may differ from those of other corporations, and some of them may arise in the future and may reduce the Corporation's available cash.

They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing and repurchase of long-term debt, some deferred tax asset provisions or reversals, premiums paid on long-term debt refinancing, gains or losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate swaps, foreign exchange gains or losses on long-term debt and financial instruments, specific items of discontinued operations and other significant items of an unusual, non-cash or non-recurring nature.

RECONCILIATION OF NON-IFRS MEASURES

To provide more information for evaluating the Corporation's performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS ("non-IFRS measures"), which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance measures and non-IFRS measures is useful to both management and investors, as they provide additional information to measure the performance and financial position of the Corporation. It also increases the transparency and clarity of the financial information. The following non-IFRS measures are used in our financial disclosures:

• Operating income before depreciation and amortization (OIBD): Used to assess operating performance and contribution of each segment when excluding depreciation and amortization. OIBD is widely used by investors as a measure of a corporation's ability to incur and service debt and as an evaluation metric.
• Adjusted OIBD: Used to assess operating performance and contribution of each segment on a comparable basis.
• Adjusted operating income: Used to assess operating performance of each segment on a comparable basis.
• Adjusted net earnings: Used to assess the Corporation's consolidated financial performance on a comparable basis.
• Adjusted free cash flow: Used to assess the Corporation's capacity to generate cash flows to meet financial obligations and/or discretionary items such as share repurchase, dividend increase and strategic investments.
• Net debt to adjusted OIBD ratio: Used to measure the Corporation's credit performance and evaluate financial leverage.
• Net debt to adjusted OIBD ratio on a pro-forma basis: Used to measure the Corporation's credit performance and evaluate the financial leverage on a comparable basis, including significant business acquisitions and excluding significant business disposals, if any.

Non-IFRS measures are mainly derived from the consolidated financial statements, but do not have meanings prescribed by IFRS. These measures have limitations as an analytical tool and should not be considered on their own or as a substitute for an analysis of our results as reported under IFRS. In addition, our definitions of non-IFRS measures may differ from those of other corporations. Any such modification or reformulation may be significant.

The reconciliation of operating income (loss) to OIBD, to adjusted operating income (loss) and to adjusted OIBD by business segment is as follows:

	Q2 2019
(in millions of Canadian dollars) (unaudited)	Containerboard	Boxboard Europe	Specialty Products	Tissue Papers	Corporate Activities	Consolidated
Operating income (loss)	84	19	6	1	(28)	82
Depreciation and amortization	30	11	7	16	8	72
Operating income (loss) before depreciation and amortization	114	30	13	17	(20)	154
Specific items:
Loss on acquisitions, disposals and others	—	—	—	—	3	3
Restructuring costs	—	—	—	1	—	1
Unrealized gain on financial instruments	(1)	—	—	—	(1)	(2)
	(1)	—	—	1	2	2
Adjusted operating income (loss) before depreciation and amortization	113	30	13	18	(18)	156
Adjusted operating income (loss)	83	19	6	2	(26)	84
	Q1 2019
(in millions of Canadian dollars) (unaudited)	Containerboard	Boxboard Europe	Specialty Products	Tissue Papers	Corporate Activities	Consolidated
Operating income (loss)	84	18	3	(8)	(25)	72
Depreciation and amortization	27	11	8	12	9	67
Operating income (loss) before depreciation and amortization	111	29	11	4	(16)	139
Specific items :
Gain on acquisitions, disposals and others	(10)	—	—	—	—	(10)
Impairment charges	3	—	—	1	—	4
Restructuring costs	—	—	1	4	—	5
Unrealized gain on derivative financial instruments	—	—	—	—	(3)	(3)
	(7)	—	1	5	(3)	(4)
Adjusted operating income (loss) before depreciation and amortization	104	29	12	9	(19)	135
Adjusted operating income (loss)	77	18	4	(3)	(28)	68
	Q2 2018
(in millions of Canadian dollars) (unaudited)	Containerboard	Boxboard Europe	Specialty Products	Tissue Papers	Corporate Activities	Consolidated
Operating income (loss)	82	22	4	(9)	(26)	73
Depreciation and amortization	20	8	5	16	9	58
Operating income (loss) before depreciation and amortization	102	30	9	7	(17)	131
Specific items:
Unrealized loss on financial instruments	3	—	—	—	—	3
	3	—	—	—	—	3
Adjusted operating income (loss) before depreciation and amortization	105	30	9	7	(17)	134
Adjusted operating income (loss)	85	22	4	(9)	(26)	76

Net earnings, as per IFRS, is reconciled below with operating income, adjusted operating income and adjusted operating income before depreciation and amortization:

(in millions of Canadian dollars) (unaudited)	Q2 2019	Q1 2019	Q2 2018
Net earnings attributable to Shareholders	31	24	27
Net earnings attributable to non-controlling interests	9	9	10
Provision for income taxes	10	8	16
Share of results of associates and joint ventures	(2)	(2)	(3)
Foreign exchange gain on long-term debt and financial instruments	(1)	(6)	—
Financing expense, interest expense on employee future benefits and other liabilities	35	39	23
Operating income	82	72	73
Specific items:
Loss (gain) on acquisitions, disposals and others	3	(10)	—
Impairment charges	—	4	—
Restructuring costs	1	5	—
Unrealized loss (gain) on derivative financial instruments	(2)	(3)	3
	2	(4)	3
Adjusted operating income	84	68	76
Depreciation and amortization	72	67	58
Adjusted operating income before depreciation and amortization	156	135	134

The following table reconciles net earnings and net earnings per share, as per IFRS, with adjusted net earnings and adjusted net earnings per share:

(in millions of Canadian dollars, except amounts per share) (unaudited)	NET EARNINGS					NET EARNINGS PER SHARE ^1
	Q2 2019	Q1 2019	Q2 2018			Q2 2019		Q1 2019		Q2 2018
As per IFRS	31	24	27			$	0.33	$	0.26	$	0.28
Specific items:
Loss (gain) on acquisitions, disposals and others	3	(10)	—			$	0.03	$	(0.11)	—
Impairment charges	—	4	—			—		$	0.03	—
Restructuring costs	1	5	—			$	0.01	$	0.04	—
Unrealized loss (gain) on derivative financial instruments	(2)	(3)	3			$	(0.02)	$	(0.02)	$	0.03
Unrealized gain on interest rate swaps and option fair value	(6)	—	(1)			$	(0.06)	—		$	(0.01)
Foreign exchange gain on long-term debt and financial instruments	(1)	(6)	—			$	(0.01)	$	(0.06)	—
Tax effect on specific items, other tax adjustments and attributable to non-controlling interest^1	—	(1)	—			—		—		—
	(5)	(11)	2			$	(0.05)	$	(0.12)	$	0.02
Adjusted	26	13	29			$	0.28	$	0.14	$	0.30

1	Specific amounts per share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per share amounts in line item ''Tax effect on specific items, other tax adjustments and attributable to non-controlling interests'' only include the effect of tax adjustments.

The following table reconciles cash flow from operating activities with operating income and operating income before depreciation and amortization:

(in millions of Canadian dollars)	Q2 2019	Q1 2019	Q2 2018
Cash flow from operating activities	88	52	116
Changes in non-cash working capital components	36	30	(5)
Depreciation and amortization	(72)	(67)	(58)
Net income taxes paid	2	—	1
Net financing expense paid	16	43	18
Gain (loss) on acquisitions, disposals and others	(3)	9	—
Impairment charges and restructuring costs	—	(5)	—
Unrealized gain (loss) on derivative financial instruments	2	3	(3)
Dividend received, employee future benefits and others	13	7	4
Operating income	82	72	73
Depreciation and amortization	72	67	58
Operating income before depreciation and amortization	154	139	131

The following table reconciles cash flow from operating activities with cash flow from operating activities (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities. It also reconciles adjusted cash flow from operating activities to adjusted free cash flow, which is also calculated on a per share basis:

(in millions of Canadian dollars, except amount per common share or otherwise mentioned)	Q2 2019		Q1 2019		Q2 2018
Cash flow from operating activities	88		52		116
Changes in non-cash working capital components	36		30		(5)
Cash flow from operating activities (excluding changes in non-cash working capital components)	124		82		111
Specific items, net of current income taxes if applicable:
Restructuring costs	1		3		—
Adjusted cash flow from operating activities	125		85		111
Capital expenditures & other assets^1and capital lease payments, net of disposals	(64)		(76)		(72)
Dividends paid to the Corporation's Shareholders and to non-controlling interests	(9)		(8)		(12)
Adjusted free cash flow	52		1		27
Adjusted free cash flow per share	$	0.56	$	0.01	$	0.29
Weighted average basic number of shares outstanding	93,636,771		94,166,959		94,638,464

1	Excluding increase in investments

The following table reconciles total debt and net debt with the ratio of net debt to adjusted operating income before depreciation and amortization (adjusted OIBD): 

(in millions of Canadian dollars)	June 30,  2019	December 31, 2018	June 30, 2018
Long-term debt	1,866	1,821	1,616
Current portion of long-term debt	77	55	46
Bank loans and advances	16	16	21
Total debt	1,959	1,892	1,683
Less: Cash and cash equivalents	98	123	97
Net debt	1,861	1,769	1,586
Adjusted OIBD (last twelve months)	541	489	450
Net debt / Adjusted OIBD ratio	3.4	3.6	3.5
Net debt / Adjusted OIBD ratio on a pro forma basis^1	3.3	3.5	3.5

1	Pro-forma to include adjusted OIBD of 2017 and 2018 business acquisitions on a last twelve months basis and IFRS 16 Leases impact on an annualized basis as at June 30, 2019.

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SOURCE Cascades Inc.

Media: Hugo D'Amours, Vice-President, Communications and Public Affairs, 819-363-5184; Source: Allan Hogg, Vice-President and Chief Financial Officer; Investors: Jennifer Aitken, MBA, Director, Investor Relations, 514-282-2697

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